How COVID-19 gave Metcash its “biggest leg-up in two decades”

Metcash has revealed that Australian consumers continue to prefer local liquor shopping more than 18 months after the initial lockdowns of March 2020.

CEO Jeff Adams told the Australian Financial Review that he thought the status quo would return after the panic-buying period of March to early May, but “it never has since that time”.

As the AFR notes: “After the initial chaos of panic-hoarding and toilet paper shortages, it quickly emerged that the pandemic would deliver Metcash and its independent retailer customers their biggest leg-up in two decades.”

Customer preference for local neighbourhood shopping over larger stores and shopping centres has remained high. It drove Metcash Liquor to deliver significant earnings growth in the company’s financial results for the year ending April 30, 2021. Total liquor sales increased 19.2% to $4.4billion, indicating retailers have retained the new customers they acquired during the initial lockdowns.

Wholesale sales to the IBA retail banner group increased 22.6% with strong growth in Cellarbrations, the Bottle-O, IGA Liquor, Duncans, Thirsty Camel, Liquor@, Big Bargain and Porters. Very strong sales continued in the first eight weeks of FY22, increasing 26% compared with the same period in FY20, and 17.3% compared with the same period in FY21. Sales to the IBA retail banner group in the first eight weeks of FY22 increased 23.1% compared with the same period in FY20, and 2.8% compared with the same period in FY21

Adams said shopping at local liquor stores meant consumers also experienced the investments Metcash has been making in store refurbishments, pricing and range in recent years.

“We were making progress prior to the pandemic, we’d seen sales finally turn around to be slightly positive,” he said. “What the pandemic did was really accelerated that change.”

The pandemic also convinced reticent store owners that they needed to have an e-commerce offering and accelerated the roll-out of Metcash’s ‘Shop My Local’ online offer across the network in the first half of 2020.

Shop My Local was launched six months ahead of schedule to provide an option for customers not wanting to physically shop in store. It immediately saw online basket sizes surging three times the normal basket value.

Previously, only about 180 of Metcash’s 1400 independently owned IGA stores had an e-commerce offer, and most store owners were not convinced online shopping was suitable for the IGA neighbourhood store model.

“The food and liquor guys prior to COVID just weren’t interested,” Adams said. “They said it’s 4 to 5% of sales for the chains [Woolworths and Coles]; they didn’t believe it really made money. I think COVID has woken them up to that … suddenly now it’s a pull rather than push.”

Metcash’s e-commerce model sees customers order from a centralised site, with orders handled by the closest retailer and the consumer bearing the full cost of delivery, which Adams said is more cost-effective and delivers better returns.

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Categories: Business